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zlopas [31]
2 years ago
11

Suppose that the inverse demand for San Francisco cable car rides is pequals20minusStartFraction Upper Q Over 1000 EndFraction ​

, where p is the price per ride and Q is the number of rides per day. Suppose the objective of San​ Francisco's Municipal Authority​ (the cable car​ operator) is to maximize its revenues LOADING.... What is the​ revenue-maximizing price? The​ revenue-maximizing price is
Business
1 answer:
MariettaO [177]2 years ago
5 0

Answer: The​ revenue-maximizing price is $10.

Explanation:

Given that,

Inverse demand function: P = 20 - \frac{Q}{1,000}

Where,

P - Price per ride

Q - Number of rides per day

Revenue(R) = P × Q

                   = 20 - \frac{Q}{1,000} × Q

                   = 20Q - \frac{Q^{2} }{1,000}

Differentiating 'R' with respect to Q for calculating Marginal revenue(MR):

MR = 20 - \frac{Q}{500}

Here, MC = 0

MR = MC

20 - \frac{Q}{500} = 0

Therefore, Q = 10,000

P = 20 - \frac{Q}{1,000}

  = 20 - \frac{10,000}{1,000}

  = $10

Hence, the​ revenue-maximizing price is $10.

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